From Tsunami to ripple

The past week has been momentous in terms of the news coming out of Europe and the Brexit vote. So much has been written about the outcome, that it is no longer of interest. It does prove one thing though and that is that media hype, not logic drives public opinion and the consequences are violent market fluctuations. I followed the UK vote for three hours from the beginning of the count. As the ‘Leave” voted edged ahead, global markets started to react quite significantly. I have no doubt many punters gambled one way or the other and some made a small fortune while others ‘did their dough’.

The strong movements continue, however it seems that most markets have returned to their status quo ante. One thing is for sure. Fear is a stronger emotion than greed and the media loves feeding the fear. So it is in the property market. We have been reading about the imminent collapse of the apartment markets in most Australian capital cities. The fear mongers have predicted doom and gloom in order to increase readership and it is possible that some of these markets will have price corrections in the coming months. Reality however is that inner and fringe city accommodation will always be in demand and the greater our traffic problems, the stronger the need for time saving solutions.

I have noted in the past how the massive Asian population will fuel Australian property demand for decades to come. I believe that what we have experienced in recent times is just the tip of a huge iceberg. Our currency exchange is very attractive, our legal system is reliable, government privatisation of assets is unlikely to happen and our education system is among the best in the Western World. Moreover, recent changes to visa regulations have been very favourable allowing students from primary school age together with their parents or guardians to settle in Australia. We cannot start to measure the size of the medium term effect will be. In addition, consider how overseas demand will rise if the ‘Aussie Battler’ continues its depreciation against major currencies with a potential further lowering of interest rates.

China is undergoing a period of consolidation in all of its markets. Stock markets have already fallen substantially and now the property market is following a similar path, albeit less severe. In the long term, this may in fact strengthen markets worldwide and make trends more predictable. It may also curb the urge to speculate rather than invest. The Australian authorities have pandered to xenophobia by introducing new restrictions and taxes on foreign investors and the instant effect has been quite obvious. However, the impact of these measures will eventually abate just as the fear in the stock markets has eased. The status quo ante will return and property values will eventually rise again. We all trust that the rise will not be exaggerated or frenzied and will show steady long term growth.

Those who are currently sitting on the sidelines awaiting further falls have already missed and are likely to miss out on further opportunities in the same way as investors that anticipated further market falls in recent days, have been disappointed. The purchase of investment property is a long term proposition. One needs to do appropriate research and seek the right advice prior to making a decision. However, ‘paralysis by analysis’ is something that needs to be avoided at all cost.

In conclusion, believe what and who you may, my view is clear. If you are sitting on the fence about property investment, it is time to stand up and be accountable to yourself and others who are dependent on you for their future. Put in the hard yards, seek advice and act accordingly. Otherwise you will find yourself on the fence in another decade from now with not only a sore posterior but also a head full of regrets.